Osborne: Vote on Irish loan next week

BRITAIN’S Chancellor of the Exchequer, George Osborne, said yesterday he will publish legislation on its €3.8 billion bilateral loan to Ireland today, with an approval vote on the package expected next week.

The chancellor said the rate on the loan is expected to fall between those demanded by the EU and the IMF.

The EU/IMF bailout package of €67.5bn, Ireland is to contribute €17.5bn from the pension reserves, carries a low of 3.1% in interest rate charge from the IMF, against a combined loan average of over 5.8%.

The legislation to be set today “is absolutely exclusive to Ireland”. It is a bill designed to lend money to Ireland and not to other countries.

“It will have a cap on the loan that is provided. There is an ability in the legislation to increase the cap, but that would have to be done with the affirmative vote of the House of Commons, and I’m certainly not expecting to exercise that,” he said.

He added that the loan “has also got a sunset clause in it which cannot be renewed, and which means the bill will fall after five years. This is not a permanent provision for making loans to Ireland,” he said.

Elsewhere the Chancellor noted that Britain has been affected by the turbulence in Ireland in the sense that trade with Ireland has fallen.

Osborne also said he has not changed the decision-making procedure for quantitative easing.

It means that if the Bank of England’s Monetary Policy Committee votes for an extension of QE, they will still need approval from the Chancellor to make further asset purchases.

He made clear that the Treasury would most likely nod through any QE hike if the Bank of England’s Monetary Policy Committee sees it as necessary to help Britain cope with its funding crisis.

His stance contrasts with that of the EU which has refused urgings from the IMF to provide more comprehensive support for the euro zone area.

Earlier this week the IMF managing director Dominique Strauss-Kahn failed to persuade finance ministers of the 16-nation euro currency to increase the size of their financial safety net or to get the European Central Bank to step up government bond purchases.

Kahn said it was time for the eurozone to back troubled euro economies such as Portugal with “a more comprehensive solution” than has been the case.

An ECB source told Reuters, the central bank did not want to take on all the risk of supporting euro zone debtors by massive bond-buying, and wanted governments to take additional measures such as increasing the rescue fund.

The European Financial Stability Facility has the capacity to issue bonds worth up to €440 billion to help out troubled eurozone member states.

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